Morgan Stanley raised its target price for Poly Property Group (00119) to HK$4.1 from HK$2.5, and maintained its "underweight" rating.
It thinks Poly Property's future expansion potential is limited due to non-competitive agreement with its sister company, Poly Estate (Shanghai: 600048). Morgan expects further increase of its leverage due to thin margin and high funding cost due to high leverage.
It said Poly Property is only allowed to develop projects in fringes of Shanghai (e.g. Jiading district) and Guangzhou (e.g. Huadu, Liwan and Nansha). In addition, Morgan said the company has the third-highest leverage and the lowest gross and net margin among its coverage universe.
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